20230313Final_Order_No_35705.pdf

ORDER NO. 35705 1

Office of the Secretary
Service Date
March 13, 2022
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF IDAHO POWER
COMPANY’S APPLICATION FOR
APPROVAL OR REJECTION OF AN
ENERGY SALES AGREEMENT WITH
LOWER LOWLINE LLC, FOR THE SALE
AND PURCHASE OF ELECTRIC ENERGY
FROM THE LOWLINE #2 HYDRO
PROJECT
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CASE NO. IPC-E-22-28

ORDER NO. 35705

On November 9, 2022, Idaho Power Company (“Company”) applied for approval of an
energy sales agreement (“ESA”) with Lower Lowline LLC (“Seller”) (collectively the “Parties”)
for energy generated by the Lowline #2 Hydro Project (“Facility”). The Facility is a qualifying
facility (“QF”) under the Public Utility Regulatory Policies Act of 1978 (“PURPA”).
On December 12, 2022, the Commission issued a Notice of Application and Modified
Procedure setting public comment and Company reply deadlines. Commission Staff (“Staff”) filed
comments and the Company filed reply comments. No other comments were received.
Having reviewed the record in this case, the Commission now issues this final Order
conditionally approving the Company’s Application as discussed below.
BACKGROUND
Under PURPA, electric utilities must purchase electric energy from QFs at purchase or
“avoided cost” rates approved by the Commission. 16 U.S.C. § 824a-3; Idaho Power Co. v. Idaho
PUC, 155 Idaho 780, 789, 316 P.3d 1278, 1287 (2013). The Commission has established two
methods for calculating avoided costs, depending on the size of the QF project: (1) the surrogate
avoided resource method, used to establish “published” avoided cost rates; and (2) the integrated
resource plan method, to calculate avoided cost rates for projects exceeding published rate limits.
See Order No. 32697 at 7-22.
The Facility is located near Twin Falls, Idaho and has a 2,790 kilowatt (“kW”) nameplate
capacity.1 The Seller has been delivering energy from the Facility to the Company under an energy
sales agreement entered into on September 12, 1986. The Company requested an effective date of
May 1, 2023; the 1986 energy sales agreement expires on April 30, 2023.

1 The nameplate capacity remained unchanged from the 1986 energy sales agreement.
ORDER NO. 35705 2

THE APPLICATION
The ESA has a 20-year term with non-levelized, seasonal hydro2 published avoided cost
rates as set in Order Nos. 35422 and 35475. The Seller would receive capacity payments for the
duration of the ESA.
The ESA requires the Seller to estimate net energy and also adopts a “five-day advanced
notice for adjusting Estimated Net Energy Amounts for purposes of complying with 90/110
firmness requirements.” Application at 8.
The Company requested the Commission approve the ESA and declare “all payments for
the purchase of energy under the ESA . . . be allowed as prudently incurred expenses for
ratemaking purposes.” Id. at 10.
STAFF COMMENTS
Staff’s comments include relevant analyses for capacity payments, the 90/110 Rule,
avoided cost rates, and suggested a modification of Article XXIII of the ESA. Of note, the rates
from the original 1986 agreement did not contain capacity payments. Staff recommends the QF be
granted “immediate capacity payments for its entire generation capacity amount over the full term
of the ESA” in accordance with Order No. 32697. Staff Comments at 2. Citing Order No. 35506,
Staff recommends the Parties should provide more detail in Article XXIII of the ESA (concerning
the Company and the Seller’s process for future potential modifications of the Facility and seeking
approval form the Commission). Conditionally, Staff recommends that the Commission approve
the proposed ESA and declare all payments as prudently incurred for ratemaking purposes if the
parties update Article XXIII.
COMPANY REPLY
The Company states that it did not think that amending Article XXIII was necessary.
Nonetheless, the Company was willing amend Article XXIII according to Staff’s
recommendations and provided an amended version of Article XXIII accordingly. The Company
attached proposed amendments to Article XXIII and reiterated the Company’s desire to
accommodate Staff’s request despite feeling that the recommendation was unnecessary.

2 The Facility generates at least 55% of its annual generation in June, July, and August which qualifies it for seasonal
hydro rates.
ORDER NO. 35705 3

COMMISSION FINDINGS AND DISCUSSION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-502 and 61-503.
The Commission is empowered to investigate rates, charges, rules, regulations, practices, and
contracts of public utilities and to determine whether they are just, reasonable, preferential,
discriminatory, or in violation of any provision of law, and to fix the same by order. Idaho Code
§§ 61-502 and 61-503. In addition, the Commission has authority under PURPA and Federal
Energy Regulatory Commission (“FERC”) regulations to set avoided costs, to order electric
utilities to enter fixed term obligations for the purchase of energy from QFs, and to implement
FERC rules. The Commission may enter any final order consistent with its authority under Title
61 and PURPA.
The Commission has reviewed the record, including the Company’s Application, Staff’s
comments, and the Company’s reply comments. With respect to Article XXIII of the proposed
modified ESA, we remain persuaded by Staff’s Comments that this Article should be changed.
The intent of this modification is to address when the Seller seeks to modify the Facility that may
require a change in rates.
The Company’s original ESA, and proposed modified ESA, does not require Commission
approval prior to modifying the Facility. Although we appreciate the Company’s efforts to propose
modifications to Article XXIII these modifications to the ESA do not address the Commission’s
concerns, which are: (1) that the QF is paid the proper and authorized rate as of the first operation
date after Facility modification, and (2) that the description of the Facility reflected in the final
amendment describe the Facility as actually modified.
To ensure these two concerns are addressed, the Commission directs the Parties to amend
the language in the ESA to address Facility modification that could occur during the term of the
contract. At a minimum the Parties should include language that reflects the foregoing as we stated
in Order No. 35506:
1. Language that restricts the Seller from modifying the Facility from the as
built description of the Facility included in Exhibit B, without promptly notifying
the Company of that intent.

2. Language that requires the Seller to provide notification of planned
modifications (such as fuel change or capacity size change) to the as-built
description.

Order No. 35506 at 4.
ORDER NO. 35705 4

This language would ensure that the QF is required to provide prior notification to the
Company of its intent to modify its facility. However, additional language is needed to ensure
both parties agree to: (1) amend the contract reflecting the facility as actually modified, and (2)
adjust payments to the QF such that the final amounts reflect the proper authorized rates of the
facility as actually modified and as of the date when energy is first delivered as a modified facility.
Additionally, to ensure customers will not be overcharged for energy delivered from the
Facility, the Commission directs the Company to only include net power supply expense in the
Company’s Power Cost Adjustment that reflects the proper authorized rate for all energy delivered
as of the first operation date as a modified Facility.
The Commission finds it reasonable to approve the proposed ESA once amended as
discussed above. The Company’s payments for energy and capacity will be deemed prudently
incurred expenses for ratemaking purposes after the ESA has been amended.
ORDER
IT IS HEREBY ORDERED that the Company’s proposed ESA shall be approved effective
May 1, 2023, provided the Parties amend the ESA as described above.
IT IS FURTHER ORDERED that only net power supply expense in the Company’s Power
Cost Adjustment reflect the proper authorized rate for all energy delivered as of the first operation
date of the Facility, if modified, under Article XXIII of the ESA.
IT IS FURTHER ORDERED that the parties are directed to provide the Commission with
an amended ESA as a compliance filing within 15 days of this Order.
IT IS FURTHER ORDERED that all payments made by the Company for purchases of
energy and capacity under the amended ESA shall be allowed as prudently incurred expenses for
ratemaking purposes.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order regarding any matter
decided in this Order. Within seven (7) days after any person has petitioned for reconsideration,
any other person may cross-petition for reconsideration. See Idaho Code § 61-626.

ORDER NO. 35705 5

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 13th day of
March 2023.

__________________________________________
ERIC ANDERSON, PRESIDENT

__________________________________________
JOHN R. HAMMOND, JR., COMMISSIONER

__________________________________________
EDWARD LODGE, COMMISSIONER

ATTEST:

Jan Noriyuki
Commission Secretary

I:\Legal\ELECTRIC\IPC-E-22-28 Lowline\orders\IPCE2228_Final_md.docx